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Liberal government not worried about ‘sticker shock’ from Ontario pension plan

The provincial government is not worried about “sticker shock” when paycheque deductions take effect in 2017 for the new Ontario Retirement Pension Plan.

Associate Finance Minister Mitzie Hunter says her government still has to decide which workplace pension plans will be considered generous enough to be exempt from the new Ontario plan. (Robert Benzie / Toronto Star) | Order this photo

The provincial government is not worried about “sticker shock” when paycheque deductions take effect in 2017 for the new Ontario Retirement Pension Plan.

“Our major concern is that people are not saving today,” Associate Finance Minister Mitzie Hunter said Wednesday at Queen’s Park.

“The saving rate today is about 5.5 per cent of income and that is simply not enough for people to live on in retirement. The CPP (Canada Pension Plan) is inadequate, at $12,500 a year, for people to be able to live on in retirement,” she said.

“We believe that the 1.9 per cent contribution from employers as well as employees is something that is manageable.”

The mandatory ORPP — a cornerstone of Finance Minister Charles Sousa’s July 14 budget — will deduct 1.9 per cent of the pay of Ontarians who do not have a workplace pension plan. Their employers will be forced to match that contribution.

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For someone earning $45,000 a year, that will mean an additional $788 deduction annually. Future retirees will eventually receive up to $25,000 in benefits.

Two-thirds of Ontario workers do not have an employees’ pension plan.

“Those with a comparable (workplace) plan will be exempt. We have to figure out what ‘comparable’ means and make that very clear to employers,” said Hunter, adding the province will spend the next two and half years perfecting the retirement-savings scheme.

“That’s why we set up a process for consultation and engagements as well as bringing in those experts with our technical advisory group,” she said.

“Our focus here is to make sure that we have a very strong retirement system in Ontario that covers everyone around the spectrum.”

The provincial plan is designed to complement CPP, which Prime Minister Stephen Harper has refused to improve even though benefits max out at $12,500 a year.

But Progressive Conservative MPP Julia Munro warned many Ontarians could have a rude awakening when they realize their take-home pay will drop in 2017.

Munro said there will be “sticker shock” at a time when people are already facing increased hydro rates and other additional costs.

“Then all of sudden they’re looking at that kind of an increase in what essentially is an employee tax,” she said.

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